Brazil to woo big oil by offering 30% of Libra’s profits

Brazil is preparing to woo producers by offering at most a 30% take for developing its largest oil field. Analysts say it’s enough to spur interest.

The oil regulator is preparing a road show to the U.S., Europe and Asia in late June and early July to market Libra, the largest oil discovery in Brazil that is up for auction in October, Magda Chambriard, the head of the National Petroleum Agency, said yesterday. The quality of the oil and the size of the reserves have lured the interest of all major companies from Chevron Corp. to China Petrochemical Corp., or Sinopec, she said.

Brazil is competing for investments at a time producers are using new technologies to extract crude from shale beds across the U.S. and explorers are expanding activity off the coast of Africa. The country is counting on the so-called pre-salt region where Libra and its biggest finds are located to double crude output by 2020.

“In my mind it is impossible to consider less than 70% as a government take,” Chambriard said in an interview yesterday. “When the field is larger, when it has more volume, the government percentage is more.”

The government take includes taxes, a signing bonus and so-called profit oil that companies must pledge to win a stake in the field, she said.

‘Very Unique’

Companies could wind up handing the government about 80% of returns from the project because drilling has confirmed the high quality oil at Libra, compared with most oil auctions that offer unexplored tracts, said Bob Fryklund, vice president of energy consulting firm IHS CERA.

“It’s a different kettle of fish,” Fryklund said by phone from New York. “My gut is you’re looking for something in the 80% range. This is very unique, there hasn’t been anything like it.”

The prospect can “easily” reach a million barrels a day, double the output of OPEC member Ecuador, when 12 to 18 production platforms are eventually anchored across the field, Chambriard said. The field will start producing as soon as five years after it’s sold, she said.